You’ve read and heard a boatload of news on current home prices. Each time you hear it you’re wondering whether we’ve reached “the bottom.”
Sound the gong! Someone said “the bottom”!
In our region, many experts believe we are near bottom prices, if not already there.
One of the ways this is determined is to look at the percentage of distressed properties on the market. A distressed property is defined as a home in foreclosure or that is bank owned. It is these kinds of homes that bring down the value of non-distressed properties.
In Pennsylvania, the distressed property rate is 17 percent, as of last month. We are in better shape than most states. Only Iowa, New Mexico, South Dakota and Alaska have fewer distressed properties.
That means that 46 other states have a longer road ahead of them in depleting their distressed properties supply currently on the market or continuing to come on the market.
It is this supply that is bringing down the values of other homes because of their discounted price, which is usually due to the condition and lack of care to the property. Some buyers are willing to take on these repairs to get a lower price home. This supply of foreclosed homes needs to decrease before we see home prices gain.
If you’re someone who is considering buying a home, but want to wait even longer because you feel that prices are going to drop even more, I say, think this through.
Getting a great deal on a home is not just about the price of the home, but more about the costs to purchase. Buying now while interest rates are low (because the economy is still recovering) gives you an advantage. Your buying power dwindles each time the interest rate goes up.
Take this scenario for example:
Mortgage amount of $216,000 at 5 percent interest rate = principal and interest payment of $1,159.
Mortgage amount of $216,000 at 6 percent interest rate = principal and interest payment of $1,295.
The difference is $136 to your monthly payment. Multiply that by 12 and you’d be spending $1,632 more per year.
Interest rates are projected to increase as the year goes on. We hit an all-time low last November at 4 percent. We don’t expect to see that again.
Keep in mind that positive economic news, like stock market gains, translates into higher home loan rates. Therefore, waiting could mean paying more for the money needed to buy.
If you would like more information on this topic, please contact Gina Wherry, Realtor, 215-256-1200 ext. 322 or email: gina@scottloperteam.com or visit our website: www.scottloperteam.com.
